When your minor child earns interest on a certificate of deposit, you can report the interest income on your own tax return, as long as the interest earned is less than the maximum amount allowed by the Internal Revenue Service (IRS) for that year. If your child's interest earnings exceed the limit for the year, you must file a separate return for the child in order to report the interest earned. Even if you file a separate return for your child, the interest earned will still be taxed at the parent's tax rate.
File the Interest on Parents Return
Step 1
Obtain IRS Form 8814, Parents' Election To Report Child's Interest and Dividends. You can download and print the form from the IRS.
Step 2
Enter your name, your child's name and each of your Social Security numbers in the top section of Form 8814.
Step 3
Enter the amount of taxable interest your child earned on the CD in Part 1 of Form 8814.
Step 4
Complete the calculations on the form to determine the amount of interest income to transfer to Form 1040 and the amount of tax due on the minimum limit amounts set for the year.
Step 5
Transfer the taxable interest that exceeds the minimum limit to the "Other Income" line on Form 1040 and transfer the tax due on the minimum amount in the "Tax and Credits" section of Form 1040 in the line designated for Form 8814 tax.
Step 6
Complete the remainder of your tax return as usual.
File a Separate Return
Step 1
Obtain Form 8615, Tax for Certain Children Who Have Investment Income of More Than (amount). You can download and print the form from the IRS.
Step 2
Input your child's name and Social Security along with your name and Social Security number in the top section of the form. Indicate your filing status on your personal tax return by checking the appropriate box.
Step 3
Enter the amount of interest earned on the CD on Form 8615 and complete the calculations as directed.
Step 4
Transfer the indicated amounts to the child's Form 1040 and complete the tax filing as usual.
Tips and Warnings
- If you are not certain how to claim your child's interest on your tax return, consult a tax professional before filing your return.
Things You'll Need
- Form 8814
- Form 1040
- Form 8615
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